The racing
industry is going to the dogs: gallops and trots are increasingly dependent on
betting turnover from greyhound racing.
Greyhound sued for a bigger share of the annual surplus, complaining the
other two codes were ganging up on it. The
Racing Board acted unlawfully when it assumed to itself powers to vary
distributions, the High Court ruled.
In 2016, the Racing
Board distributed $135.2 million to the three racing codes: thoroughbred
racing, trotting and greyhounds. Its
annual report does not highlight how this amount is divided between the three
codes. And for good reason argues
Greyhound NZ. It complains a permanent
cross-subsidy is being promoted by the Racing Board with the connivance of both
thoroughbred racing and trotting. In the
High Court, Justice Williams ruled there was no evidence that the gallops and
the trots were angling to gain a permanent subsidy but he warned that any
failure by them to revitalise their codes could result in a successful legal
change to the distribution formula. The
Racing Board acted unlawfully by assuming to itself the power to vary
distributions by reference to its own unstated criteria, he ruled.
Greyhound’s complaints
have their origins in a 2010 agreement between the codes allocating base funding
on a formula: gallops (55%); trots (30%); and greyhounds (15%). This formula understated greyhounds share of
TAB betting. The Racing Board controls
all race and sports betting in New Zealand through its TAB brand. Greyhound conceded ground because of the dire
state of domestic horse racing, particularly thoroughbred racing. Burdened with the high cost structure of
maintaining 64 tracks around the country, horse racing was struggling
financially. By comparison, greyhound
betting was booming. It is a
made-for-television sport with multiple quick-fire races. Greyhound’s concession was intended to give
horse racing a chance to revitalise its sport.
Monday horse racing, intended to attract Australian punters, subsequently
proved a failure and was scrapped.
Distribution of sports
betting profits is governed by the Racing Act.
The Act states profits are to be divided between the three codes in
proportion to their respective shares of betting turnover, unless a different
formula is agreed by majority vote.
Attempts by the Racing Board to control distributions was chopped out of
the draft act before it was passed.
The High Court was told
that when the 2010 formula came up for renegotiation in 2016, Greyhound’s share
of betting which amounted to 19 per cent of TAB turnover in the previous year translated
to only a 13.5 per cent share of base funding for Racing Board distributions. Over Greyhound complaints, the two horse
racing codes signed off on the deal and the Racing Board added its signature.
The Racing Board has a
statutory obligation to ensure the long-term viability of racing. This can involve degrees of
cross-subsidisation. But it is for the
codes to decided how betting surpluses will be distributed, Justice Williams
ruled. The Racing Board is a
broker. It does not make the decisions. The racing industry generally, and
thoroughbred racing in particular, will need to make some hard decisions in
relation to its structural problems, Justice Williams said. Permanent cross-subsidisation between codes
would eventually amount to a breach of the Act, he ruled.
NZ
Greyhound Racing v. Racing Board – High Court (28.07.17)
17.090